NEW YORK, May 3 /PRNewswire-FirstCall/ -- Hudson Highland Group, Inc. (Nasdaq: HHGP), one of the world's leading providers of specialized professional staffing, retained executive search and talent management solutions, today announced financial results for the first quarter ended March 31, 2006. 2006 First Quarter Summary * Revenue of $344.7 million, a decrease of 2.3 percent from $352.9 million for the first quarter of 2005 * Gross margin of $128.1 million, or 37.2 percent of revenue, down 0.1 percent from $128.2 million, or 36.3 percent of revenue, for the same year-ago period * EBITDA loss of $0.1 million, or 0.0 percent of revenue, down from an EBITDA profit of $1.8 million, or 0.5 percent of revenue, for the first quarter of 2005 * Net loss of $5.9 million, or $0.24 per basic and diluted share, compared with a net loss of $5.2 million, or $0.25 per basic and diluted share for the same period last year "First quarter consolidated results were impacted by a disappointing performance in Hudson Americas," said Jon Chait, chairman and chief executive officer of Hudson Highland Group. "However, Hudson Europe continued to make good progress, Hudson Asia Pacific stabilized on the top line and Highland Partners reported stronger profitability." "Several action steps are already underway to address the issues in Hudson Americas," said Mary Jane Raymond, executive vice president and chief financial officer. "We have made key personnel changes as appropriate, and we are moving to enhance our productivity in the region. As these moves take effect, we expect to deliver good progress toward our full-year targets." Guidance Given the current economic environment, the company expects 2006 EBITDA as a percent of revenue to be 2.5 to 3.5 percent, constant currency revenue growth of 1 to 5 percent and constant currency gross margin growth of 5 to 10 percent. This guidance is based on expectations of constant currency revenue growth of 5 to 10 percent for Hudson Americas, 0 to 5 percent for Hudson Europe and Highland Partners, and -5 to 5 percent in Hudson Asia Pacific. This guidance does not reflect the impact of any acquisitions or divestitures that the company may consider in the future. Beginning in the first quarter of 2006, the company recorded compensation expense related to outstanding employee stock options in accordance with FAS 123R. Based on current information, the company anticipates this expense to be $5.3 million for 2006. Corresponding costs in 2005 were $4.5 million. Note that the company's 2005 financial statements have been adjusted for the adoption of SFAS 123R using the modified retrospective method. Conference Call / Webcast Hudson Highland Group will conduct a conference call Thursday, May 4, 2006 at 9:00 AM ET to discuss this announcement. Investors wishing to participate can join the conference call by dialing 1-800-374-1532 followed by the participant passcode 7841127 at 8:50 AM ET. For those outside the United States, please call in on 1-706-634-5594 followed by the participant passcode 7841127. Hudson Highland Group's quarterly conference call can also be accessed online through Yahoo! Finance at http://www.yahoo.com and the investor information section of the company's website at http://www.hhgroup.com. Additional Information Please find additional information about the company's quarterly results in our shareholder letter in the investor information section of the company's website at http://www.hhgroup.com. Hudson Highland Group Hudson Highland Group is one of the world's leading professional staffing, retained executive search and talent management solution providers. We help our clients achieve greater organizational performance by attracting, selecting and developing the best and brightest people for their businesses. Our approximately 3,800 employees in more than 20 countries are dedicated to providing unparalleled service and value to our clients. More information about Hudson Highland Group is available at http://www.hhgroup.com. Safe Harbor Statement This press release contains statements that the company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including those under the caption "Guidance" and other statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to, the impact of global economic fluctuations on temporary contracting operations; the cyclical nature of the company's executive search and mid-market professional staffing businesses; the company's ability to manage its growth; risks associated with expansion; risks and financial impact associated with disposition of non-strategic assets; the company's reliance on information systems and technology; competition; fluctuations in operating results; risks relating to foreign operations, including foreign currency fluctuations; dependence on highly skilled professionals and key management personnel; the impact of employees departing with existing executive search clients; risks maintaining professional reputation and brand name; restrictions imposed by blocking arrangements; exposure to employment-related claims, and limits on insurance coverage related thereto; government regulations; and restrictions on the company's operating flexibility due to the terms of its credit facility. Additional information concerning these and other factors is contained in the company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this press release. The company assumes no obligation, and expressly disclaims any obligation, to review or confirm analysts' expectations or estimates or to update any forward-looking statements, whether as a result of new information, future events or otherwise. HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) Three Months Ended March 31, 2006 2005 (1) Revenue $344,701 $352,869 Direct costs 216,611 224,662 Gross margin 128,090 128,207 Operating expenses: Selling, general and administrative 128,194 125,913 Depreciation and amortization 4,508 4,857 Business reorganization expenses 3 529 Merger and integration (recoveries) - (43) Total operating expenses 132,705 131,256 Operating loss (4,615) (3,049) Other income (expense): Interest, net (414) (426) Other, net 777 (276) Loss before provision for income taxes (4,252) (3,751) Provision for income taxes 1,605 1,400 Net loss $(5,857) $(5,151) Basic and diluted loss per share: Net loss $(0.24) $(0.25) Weighted average shares outstanding 24,224,000 20,504,000 (1) Note 2005 financial statements have been adjusted for the Company's adoption of SFAS 123R using the modified retrospective method. (The comparable expenses for the three months ended March 31, 2006 and 2005 were $1,419 and $1,014, respectively.) HUDSON HIGHLAND GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except share and per share amounts) March 31, December 31, 2006 2005 (1) ASSETS (unaudited) Current assets: Cash and cash equivalents $33,183 $34,108 Accounts receivable, net 238,057 232,081 Prepaid and other 14,096 14,330 Total current assets 285,336 280,519 Intangibles, net 31,397 31,100 Property and equipment, net 29,715 31,438 Other assets 4,576 5,359 Total assets $351,024 $348,416 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $34,929 $24,718 Accrued expenses and other current liabilities 135,552 140,036 Credit facility and current portion of long-term debt 34,101 32,544 Accrued business reorganization expenses 4,117 4,223 Accrued merger and integration expenses 985 1,239 Total current liabilities 209,684 202,760 Accrued business reorganization expenses, non-current 3,376 4,095 Accrued merger and integration expenses, non-current 1,789 2,038 Other non-current liabilities 5,810 5,948 Long-term debt, less current portion 402 478 Total liabilities 221,061 215,319 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 10,000,000 shares authorized; none issued or outstanding � � Common stock, $0.001 par value, 100,000,000 shares authorized; issued: 24,539,889 and 24,340,462 shares, respectively 24 24 Additional paid-in capital 420,687 416,448 Accumulated deficit (323,813) (317,956) Accumulated other comprehensive income - translation adjustments 33,295 34,811 Treasury stock, 15,798 shares (230) (230) Total stockholders' equity 129,963 133,097 $351,024 $348,416 (1) Note 2005 financial statements have been adjusted for the Company's adoption of SFAS 123R using the modified retrospective method. HUDSON HIGHLAND GROUP, INC. SEGMENT ANALYSIS (in thousands) (unaudited) For the Three Months Hudson Ended Hudson Hudson Asia Highland March 31, 2006 Americas Europe Pacific Partners Corporate Total Revenue $112,248 $116,141 $100,538 $15,774 $ - $344,701 Gross margin $25,322 $50,965 $36,861 $14,942 $ - $128,090 Adjusted EBITDA (1) $(3,377) $5,550 $ 4,732 $1,288 $(8,297) $(104) Business reorganization expenses - - - 3 - 3 Merger and integration expenses - - - - - - EBITDA (1) (3,377) 5,550 4,732 1,285 (8,297) (107) Depreciation and amortization 1,506 1,739 775 323 165 4,508 Operating income (loss) $(4,883) $3,811 $3,957 $962 $(8,462) $(4,615) For the Three Months Hudson Ended Hudson Hudson Asia Highland March 31, 2005 (2) Americas Europe Pacific Partners Corporate Total Revenue $112,105 $122,399 $103,501 $14,864 $ - $352,869 Gross margin $27,574 $50,451 $36,116 $14,066 $ - $128,207 Adjusted EBITDA (1) $2,271 $3,101 $6,696 $376 $(10,150) $2,294 Business reorganization expenses (recoveries) 608 (79) - - - 529 Merger and integration (recoveries) (43) - - - - (43) EBITDA (1) 1,706 3,180 6,696 376 (10,150) 1,808 Depreciation and amortization 976 978 2,417 354 132 4,857 Operating income (loss) $730 $2,202 $4,279 $22 $(10,282) $(3,049) (1) Non-GAAP earnings before interest, income taxes, special charges, other non-operating expense, and depreciation and amortization ("Adjusted EBITDA") and non-GAAP earnings before interest, income taxes, other non-operating expense, and depreciation and amortization ("EBITDA") are presented to provide additional information about the company's operations on a basis consistent with the measures which the company uses to manage its operations and evaluate its performance. Management also uses these measurements to evaluate capital needs and working capital requirements. Adjusted EBITDA and EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities, and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the company's profitability or liquidity. Furthermore, adjusted EBITDA and EBITDA as presented above may not be comparable with similarly titled measures reported by other companies. (2) Note 2005 financial statements have been adjusted for the Company's adoption of SFAS 123R using the modified retrospective method.
SOURCE Hudson Highland Group, Inc.